Sensing an improved demand scenario, fast moving consumer goods companies are announcing price hikes again even as the increase in input costs are lower than last year.
Analysts say while price hikes have been imminent after the massive price cuts that companies undertook in the last two years, companies have been waiting for the right time.
On Thursday, when FMCG major, Procter & Gamble announced the global relaunch of Pantene, the shampoo brand's price tag was higher by two to six per cent depending on the pack size.
Similarly, P&G's has hiked the price of its detergent brand Tide by two per cent from Rs 100 to Rs 102. It's the same story with others. HLL has increased prices in several categories.
In laundry, Surf Excel Blue prices have increased by Re 1 (2.5 per cent) on the 500 gm pack. Similarly Rin Advanced powder (500 gm) prices increased by four per cent. It's similar for other HLL brands that have seen hikes in the previous three quarters of this year.
Says, Abhijeet Kundu, an FMCG analyst with stock broking firm Prabhudas Lilladhar, "If you look at the input cost increases on a year-to-year basis, the pressure was higher last year.
In fact, the input costs pressures are lower this year." For example, take the case of oil-based derivatives like linear alkyl benzene (LAB), a key ingredient in detergents. Last year, LAB prices increased by about 16 per cent. This year the increase has been relatively lesser at 10-12 per cent.
So why have FMCG companies been increasing prices across the board from cigarettes and hair dyes to detergents or shampoos? Analysts explain that companies want to restore the margins they lost from price cuts in the previous years. Detergent majors, P&G and HLL had announced price cuts in 2004.
"In these cases, the price hike was imminent, it was just about increasing prices in an improved demand scenario," says another Mumbai-based analyst.
But consumers could brace for further hikes because prices have not yet reached the level of 2004. "Companies are benefiting from an increase in volumes which has given them the confidence to push the price hikes in categories, irrespective of input cost hikes," says an analyst.
